Illinois Looking to Raise Sports Betting Tax Rate

Governor J.B. Pritzker of Illinois is ready to wager that the sports gambling sector, which brought in over $150 million for the state in 2023 alone, won’t be badly impacted by a tax rate increase that would more than double it. The Democratic governor has proposed raising the tax rate on sportsbook profits from the current 15% to 35%. This idea was tucked away in his budget blueprint for the fiscal year 2025. According to Pritzker, the action is anticipated to bring in an extra $200 million in tax revenue annually. According to the proposed budget, it’s one of several “revenue adjustment” ideas that may help the state make an additional almost $1 billion in revenue in the upcoming year. The governor’s press secretary, Alex Gough, said to the media, “Gov. Pritzker has taken action to ensure corporations are paying their fair share. Since the legalization of sports betting in Illinois, gaming companies have enjoyed one of the lowest sports wagering tax rates in the nation. In that time, the sports betting industry has exploded, and corporations are raking in huge profits.”

Illinois has had one of the lowest tax rates on sports wagering among all states since sports betting was first legal there. Since then, the sports betting market has flourished and businesses have made enormous profits. Nonetheless, a few tax policy experts and Republican lawmakers are worried that it could impede the industry’s expansion, impact betting odds, and pave the way for illegal bookmaking.

“The most likely result in the short term is bettors will get worse odds because the sportsbooks will want to make their money back,” said Adam Hoffer, director of excise tax policy at the Washington, D.C.-based Tax Foundation to the media. “But there are long-run effects as well, where you might see it deter other companies from opening (sportsbooks) in Illinois, which would hinder competition.”

There are now 30 states that tax sports betting. Illinois has a lower rate than only eight other states, at 15%. The Tax Foundation states that sportsbook profits are likewise subject to a 15% tax in Louisiana, Maryland, and Virginia. However, states like Delaware, Rhode Island, New Hampshire, and New York all impose taxes of at least 50%.

“I can’t believe every state hasn’t brought it up to 51% like New York,” said Alan Woinski, president of Gaming USA Corp to the media, “I’m not a fan of tax rates being raised for anything, but the industry kind of brought this on itself,” he added, referring to how high rates have not deterred sportsbooks in New York. “New York’s making more money than ever,” he said.

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Additionally, sports betting has become increasingly profitable for Illinois in recent times. The state received more over $19.2 million from sports betting in December 2023, the month for which the Illinois Gaming Board’s most recent tax collection statistics was available. Compared to October 2023, the next most profitable month, that is 14% more.

Gaming board records indicate that the majority of sports betting is done via online apps. Bets placed at physical sportsbooks accounted for less than $4.9 million of the $150.3 million in tax revenue produced by sports betting in 2023.

In contrast to the existing 15% tax rate, which raises money for the state’s capital projects fund, the additional 20% tax rate would raise money for the state’s general budget, which would then be used to pay for health care, education, and other expenses related to the state’s migrant crisis.

Pritzker proposed raising income next year by capping the merchants’ sales tax rebate in addition to raising the tax rate on sports betting. Pritzker estimated that this move would bring in an additional $101 million for the state and $85 million for local governments.

Pritzker suggests adding at least three additional years to the $500,000 yearly cap on company net operating loss tax deductions. Budget estimates show that this would give the state an additional $526 million in funding for the upcoming fiscal year.

John Curran, the minority leader in the senate, argues that rather than boosting spending, the state should be cutting back.

The Downers Grove Republican said to the media that “the governor’s inability to control his spending is now turning into a very aggressive tax increase on a new Illinois industry.” He went on to say that, “Regardless of where you stand on sports betting, raising taxes by nearly $1 billion to pay for nearly $1 billion in spending on noncitizens is unfair to hardworking Illinois families and businesses.”

The House Gaming Committee’s chairman, state representative Dan Didech, a Democrat from Buffalo Grove, said to the media that talks over increasing the tax rate on sports betting are “very preliminary.” But he stated, “I’m open to it.”

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